Compliance officers across Europe can crack open the champagne early this year, toasting the finally agreed upon proposed amendments to the Fourth Money Laundering Directive (4MLD). Tax evaders and money launderers will be less excited by the news, especially as, if all goes smoothly, implementation could be just 18 months away. The new amendments were initially designed to close loopholes in the EU tax framework that were highlighted by the Panama Papers and to strengthen counter terror financing controls in light of the 2015 Paris attacks. However, in the fast-moving world of financial crime, further problems are now being addressed by these amendments such as increased regulation of digital currencies.
The scope of the amendments are ambitious especially in regard to increasing transparency. Beneficial ownership registers, that states should have compiled when implementing 4MLD, will become public and connected between states. UBO information on trusts will be accessible to competent authorities and it will become much more difficult to use prepaid cards anonymously. The amendments will also make it easier for FIUs to share information, a weakness highlighted many times over the past year.
In theory, these amendments could go far in tackling various problems that have made it easy to commit financial crimes in Europe. In practise however, it may push financial crime to other regions where controls are weaker. A summary of what has been settled upon can be found here.
The OCC’s National FinTech Charter overcame a significant hurdle last week as a federal judge dismissed the challenge that the NYSDFS had brought against it. The Charter, which has been controversial in the US FinTech community, would allow FinTechs to operate across state lines, instead of having to get a banking license in each state it operates in, which is time consuming and costly.
Although intended to be positive for FinTechs, some argue that this would create two tiers of firms – regulated and unregulated. Making it difficult to operate for those seemingly ‘illegitimate’ FinTechs who haven’t subscribed to the charter. Making it difficult to operate for FinTechs who haven’t subscribed to the charter. The Charter requires FinTechs to comply with regulations comparative to the same levels that banks do, which is often a burden for new FinTechs entering the market, stifling innovation.
The challenge to the Charter was dismissed as the OCC itself is yet to finalize it and so the objection was seen as premature. The Charter is not out of the woods yet, however. It is questioned whether the OCC even has the authority to issue a nationwide charter under the National Bank Act. Additionally, the Charter is also being taken to court by the Conference of State Bank Supervisors (CSBS).
Transparency International have launched a visual representation of the results of FATF Mutual Evaluations, which they are calling the Effective-O-Meter. FATF mutual evaluations, as covered last week, evaluate the controls and measures that a country has in place to prevent, identify and prosecute money laundering, terror financing and other financial crimes. The key findings from the reports however, can be a little difficult to understand in a global context. This new visual representation of how successfully, or more commonly, unsuccessfully, countries comply with the 40 recommendations will hopefully increase the impact of these reports.
The Effective-O-Meter currently has a global result of 32%, showing just how poor AML compliance is across the world. The impact of which are felt nowhere more than in developing countries who have their wealth depleted by capital flight and struggle to attract Foreign Direct Investment (FDI) due to poor controls. The FATF framework is designed to combat this but can only be as successful as how thoroughly it is implemented. FATF’s new focus on “effectiveness” of controls and this new visual representation will hopefully act as a reminder of the amount of work that still needs to be done.
🎄 ComplyAnalysis wishes you a very merry Christmas & will return on January 10th 🎆
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